US intervention in the bond market weakens the dollar; Australian and New Zealand currencies remain steady at multi-week highs

1. On Thursday, the Australian dollar and New Zealand dollar remained near multi-week highs, mainly driven by a weaker US dollar. The US Treasury unexpectedly expanded the scale of long-term Treasury buybacks, triggering market concerns about a rapid rise in yields and putting pressure on the US dollar. The AUD/USD edged down 0.1% to $0.7116, after rising as much as 0.5% overnight; NZD continued its rally, hitting an 11-week high at $0.5953, up about 0.3%.2. Australia's June employment data was unexpectedly weak, putting pressure on the Australian dollar. Data showed the number of employed people declined by 15,800, far below market expectations of a 15,000 increase; the unemployment rate edged up to 4.5%, close to a five-year high, suggesting the labor market is weakening. Analysts at Capital Economics believe this confirms the labor market is indeed softening, in line with the Reserve Bank of Australia's policy objectives, but the current data may still not be enough to prompt the central bank to change its tightening bias.3. Market expectations for further rate hikes by the Reserve Bank of Australia have cooled, with the probability of a rate hike in September only 17%, but the probability of raising rates to 4.60% by early next year remains as high as 70%. On a technical level, if the Australian dollar breaks through the resistance at $0.7129, it will open the way toward $0.7200 and previous highs at $0.7277; the next resistance for NZD is at the double top around $0.5993, with key support near $0.5822.4. Another background for the weak US dollar is that the US Treasury suddenly doubled the size of longer-term US Treasuries eligible for routine buybacks, which was interpreted by the market as officials’ concerns over the recent surge in yields to a 19-year high, but could also undermine investor confidence in US fiscal management.